Improving liquidity is key to an economy

I think lack of liquidity is a symptom, not a cause. The main cause is there just isn’t enough supply and demand to support a market with tight spreads between buy and sell.

If I had to hypothesize, this is because the rate at which consumables are required is too close to the rate at which they can be produced. I think best case it’s at a rate of something less than 10:1; that is for every pioneer-day dedicated to it, you can only produce maybe 10 pioneer-days worth of DW, RAT, and OVE. I’m guessing it’s quite less than that actually; I can’t self-produce OVE, but if I only produce DW and RAT, my own workforce uses 50% (1/2) of my DW and 25% (1/4) of my RAT. So this means I can only support one similarly-sized workforce as my own of DW, and 3 of RAT. And because these are ratios, even if I double my efficiency (which I don’t think is even possible? Can you get to 200%?), the limit would be 3:1 for DW (consume 1 of 4) and 7:1 (consume 1 of 8) for RAT.

You just can’t have much liquidity when you can’t support a workforce more than maybe 7 times your own. And note - this doesn’t depend at all on the money supply; this is just a hard limit based on required consumables.

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Farms wouldn’t require any transportation with this system. It’s a closed planetary loop profiting off larger players logistics in a developed world. Whenever someone sells consumables to the planet, they make them available to everyone, so new players profit from the logistical advantages. That’s a big problem when starting out because you cannot fill up your ship and it increases cost per ton for anything you do.

The starter package is a rig, farm and food processor, so you can convert credits into labor for H2O, then labor + H2O for crops and then labor + crops for RAT or labor + H2O for DW. You never need to send a ship out until you’re ready to expand. Since you pay the same price for OVE, COF or PWO, you’re on equal footing against larger players. Also, larger players will most likely be exporting their RAT and DW, which means local selling prices are equal to non-farmable prices minus transportation. A slight decrease in worker efficiency increases your profitability.

The advantage they can get is if they can mine H2O elsewhere and ship it there to maximize fertility. It makes no sense to sell locally because you will be moving ships empty back to H2O planet which wastes fuel cargo capacity. There would be plenty of planets without fertility looking for RAT that pays more and these will be your targets. If you’re at that point, you’re running full ships and you’re likely maxed on bases, so lowering efficiency isn’t worth it.

For example, 70% efficiency labor costs 30 per RAT and planet pays 40. 100% efficiency costs 50, so you’re unprofitable locally, but a nearby planet buys for 60. Profit per item is the same, but profit per day is 42% higher without factoring transportation costs. Using a 2 per RAT transport cost means 8 per item or 11.36 for the same time. This trade is unavailable to the newer player because they cannot fill a ship yet. Both players profit.

If the big player decides to sell locally, then you have a planet with very cheap labor due to low RAT prices. You can do any other production and be profitable. It’s the capital vs labor dichotomy I talked about in another comment. A big player tanking labor prices benefit everyone else since there’s an implicit public trade either everyone having equal access to their RAT output.

The reason why this works is because planets are points in space and resources are not exclusive. There’s no location based rent that older players can extract from the economy to keep new players from growing, unlike map based economic games where being close to resources grants you an advantage. Whatever configuration of labor and capital that produces more than its input is always valid because nothing is drained from rent.

Actually, in an earlier version of the universe, the CXs were situated on the four main starter planets. But this gave a massive advantage to players who started on those planets, and a disadvantage to everyone else. So they were moved off planet.

If there were a lot more players, then perhaps you could have a CX on every planet and operate like you describe, but currently there isn’t enough liquidity on the CXs that we have. Adding more CXs will only make that worse. I think the current setup, with a limited number of CXs off planet, is the optimal one given the circumstances.

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This shouldn’t matter. It impacts the maximal growth rate of the economy, but for trading it’s not the main factor. Complexity of production chain is.

Since DW is used in every production chain by its workers, we can break down the cost of anything into DW + Others and then Others into DW + Others. At infinity, it’s all DW.

In the case of a FP turning 10 H2O into 7 DW, that can be repeated 10 times per day at 100% efficiency. It employs 40 PIO, which consumes 1.6 DW. That means there’s 68.4 DW per day that must get processed elsewhere. About 97% of the requirements can then be outsourced and traded for. Even if the net final output is 5 DW, there’s 63.4 DW that gets consumed along the way and could be optimized if trading was frictionless and this is potential liquidity that doesn’t hit the markets when it’s all private.

For example, if all I had was a FP, I could go to a CX, bring my 68.4 DW, convert that into H2O, fuel and consumables and go back home. It doesn’t mean it would be profitable, but that’s volume that would be hitting the exchange every day.

That’s economic rent at play and it’s undesirable. It was a good move to move them off planet.

I’m not advocating for CXs on all planets though. I’m only saying the labor should be 2 separate unidirectional swaps. Consumable → Cash and Cash → Labor. Right now it’s Consumable → Labor. Since we have Labor → Consumable, isolated loops of Labor → Consumable → Labor can exist and Cash is meaningless. If it wasn’t for planetary tax, Cash could be completely skipped with a barter economy emerging. That’s a bit what is going on right now and it happens in every MMO where money is pointless.

Disagree. There are some other reasons related to game mechanics that make cash useful. First of all the MM sell orders. One can always, whatever the state of the market, convert cash into useful materials, albeit at a bad conversion rate. With these MM orders, cash will always no matter what retain a minimal value. The second reason is that right now there is no mechanic in game to exchange materials against materials directly, without using cash. Some corporations like FIOC emulate barter, but it is inconvenient because it requires two steps instead of one. In the future, direct barter mechanics will be introduced. Personally, I don’t have anything against barter and actually would like to see barter introduced. Again, even with barter, the value of cash won’t drop to 0 because 1) MM sell orders, 2) cash is still more convenient than barter. And I don’t think that an alternative currency will emerge that would replace cash. Because with the MM orders, hyperinflation is impossible.

An other advantage of cash over barter is that cash is non-physical. It does not take inventory space. One can also use it on any planet. There is no need to ship it from planet A to planet B in order to purchase something on planet B. Using a physicalized material as an alternative currency is a hassle. Much greater transaction costs.

Your example from Diablo 2 does not apply to Prosperous Universe. In Diablo 2 the transaction costs for using the Stone of Jordan as a currency for exchanges are minimal. In PrUn, using anything physicalized as a currency creates great transaction costs, because of the shipping (+ the inventory management). Imagine PG (polymer granulate) is used as an alternative currency, because it does not take a lot of inventory space and because it is not so easy to spam. Imagine you have a base on Harmonia and another one on Phobos, which is 2 jumps away. Imagine you want to purchase something on Harmonia for your base there. Now imagine that you ran out of PG on Harmonia, and have PG left only on Phobos. Then for your transaction you would need to ship some of the PG from Phobos all the way to Harmonia, spend fuel on that, as well as the very scarce and precious ship flight time. That’s all transaction costs.

One has also to take into account that barter is accessible only to players who purchased a PRO license. I believe that the majority of the player base has only a trial license. They can only trade on the commodity exchange stations (CX), and cash is required for that. No direct player to player exchange for trial licenses.

Easy solution. Farming recipes that use PFE/SOI. Please help spread the word of the gospel my brothers.

Problem is, the veteran players can have control of the market more than newer players. If veteran players can make at a lower cost and sell at a lower price, newer players make at a higher cost and sell at loser price. Their ROI will be much lower. Rich will just get richer. The progression of newer players will slow and thus player retention will drop. player counts will drop. So, we should just use the recipes to increase liquidity. Increase supply and thus more liquid. Add PFE/SOI to farming recipes to increase the supply but increase margins for everyone. Check out my post called the master solution, ultimate solution what not or whatever jibberish is there. Thank you

This is completely off-topic! Please, stop spamming every thread with this PFE/SOI !

How is it off topic? You’re talking about liquidity of markets. Putting PFE/SOI in farming recipes would increase supply of a material. More supply = more liquid. ?? Farming products are high volume in terms of all suppy and demand. So this definitely applies here. The whole goal of this discussion is to increase liquidity. Id love to hear your thoughts on my thoughts because I am a new player. If you can prove to me its irrelevant than I will delete my posts. Also, if you consider me posting 1 time to every forum or thread I find relevant to put it in, then you don’t know what spamming is.

In this topic people do not discuss particular recipes and how balanced they are. You have your own separate posts where you raised this question. And why only PFE/SOI? Because you produce it? There are plenty of other recipes that need to be re-balanced.

Higher supply will lead to smaller spreads. Not only PFE/SOI. Never said that. I’m just using it as an example because it makes sense and I produce it. I’m lobbying. And providing my opinion on issues for the game at large. This topic is so interwoven and interconnected into the game. You can introduce CX buy/sell mechanics to solve the solution, but I can’t propose changes to recipes?

Let’s back up a little bit - what is the actual problem?

There was an assertion that “new players can’t simply plop in and integrate easily” - but I question that assertion. I was able to “plop in” very easily, partly because of the high spreads. If the spreads were tight, I’d be forced to participate with whatever price point was set up before me and have very little say in the matter. Basically I could only buy from the lowest sell order and only sell to the highest sell order. There would not be much opportunity to displace any of the entrenched powers.

Also a better definition of the desired state would be interesting. I don’t actually care what my ROI is in terms of cash numbers; cash is just a proxy. The real rate of return in an economy is, in fact, the efficiency multiplier on your production: for every unit of input, how many units of output can you make. This is why I asserted the recipe ratios are inherent in the ROI metric here - you can never “physically” do better than that, regardless of how many cash units you get for a transaction.

Put another way: no matter how many currency units you have, or how fast you move them around in the market, you can’t consume more than 4 DW per 100 pioneers per day, and you can’t produce more than 70 units (x max efficiency bonus) of DW per FP per day. Sure you can increase the total amount you are producing, but you can never increase your real margins past that. So I don’t know what “liquidity” would do other than maybe get you to max efficiency more quickly.

After that everything is just a psychology game, and it’s not clear how liquidity would make a difference there, because people are irrational entities.

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Yeah I think its fair and smart for a new player producing low volume to have very little say in the matter. I think there are plenty of opportunities for new players to displace the entrenched powers. New players could setup their orders lower than the entrenched powers by like 0.01. End game we would see low spreads anyway. I don’t understand exactly why we have so many high spreads right now. Shipping? Smaller players would gain an advantage by being on starter planets and increased ROI. Removing MMs I don’t agree with.

I do agree increasing the ROI of the industry would cause investment from veteran players. But this new ROI would be balanced out by the expense of the high tier good being put into the recipe. High tiers are more expensive to produce. So DEVs could balance out this ROI number to a point. But there are many different markets. Vetern players would invest in different markets. Especially if we kept it where it’s more put in more work than adding this automated system. and because of base slots I do not believe we’d see an issue for oversupply. There are limits in place to stop this from happening already.

New players would not be able to do much if an entrenched corp had buy and sell orders for 3 weeks volume and a spread of 0.01; even if the new player placed another order at the same price to be “next in line” they’d have to wait 3 weeks to sell and would probably have run out of cash to keep their lines running by then.

The devs would have to introduce new market mechanics where sales are randomly distributed to orders at the same price, or to the lowest volume ones first, or maybe volume-weighted, instead of the first-at-price mechanic we have today.

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I think there is still a problem that the volumes exchanged on the CX are low, and the trades rare, if compared to a MMO such as Eve Online. If you sell through sell orders and buy through buy orders, then you have to wait quite a lot to see your orders filled. This is of course related to the small player base, but some people discovering the game could be irritated by this and would prefer small spreads and fast transactions. An automated market-maker could be a solution, but I am not sure about this.

I don’t think we’d see a spread of 0.01 lol

Oh side note - (one of the) reasons why we have high spreads now is also because of the tick size problem.

You’re selling BSE @ 1250, someone frontruns you by a penny at 1249.99. They get to be first in line without sacrificing any meaningful value. Tick sizes need to be adjusted appropriatley to the value of items.

Look at the fuel market. SF and FF. Those are healthy markets with reasonably tight spreads.

3 sig figs is a stance I’ve had for a long time. E.G:

1250.00
1240.00
1230.00
etc

9.98
9.99
10.00
10.10
etc

I think this is an excellent point. This (AMM’s) encourages even more centralization and wealth concentration to the top. Those who have money can be LP’s and just farm money outsize to the limits of their empire. New players have a choice - wait weeks for their sell order to be filled and for them to be paid, or not benefit from the LP and sell their items instantly.

I’m not sure how to tune it - but there would be serious problems getting the economic incentives for players to add liquidity and sell items. “why would I wait 3 weeks to sell my stuff when I could just sell it now?”. Thus, you would have to have taxes (or a spread!) to incentivize people to add liquidity to selling items. And we’re right back where we started with a spread between the bid\ask.

AMM will not work here. The spread between bid\ask exists for two reasons.

  1. time-cost. You can get a higher price, but you have to wait. You can get your money now, but you get less of it. This is the decision everyone has to make, which to choose. And the spread naturally forms via economic incentives.

  2. If the spread on BSE is 1240 bid, 1250 ask, any new entrant into the market would just take the liquidity instead of frontrunning each of these orders. The tiny pennies they’d save isn’t worth potentially waiting who knows how long for your order to get filled.

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High liquidity and volume means prices will not move much when you find an opportunity as a new player. It’s easier to find a profitable ratio between goods, integrate and profit long term.

What you describe as profiting from high spread is a form of arbitrage between shipping capacity, fuel costs and your own time. Someone who can afford to wait 2 days before sending their ship can sell this time to someone who can’t because they’re operating a JIT chain. I’m doing the same thing at the moment.

So there’s tradeoffs, but they are both advantageous to new players if they can tailor their playstyle around them. With liquid markets, big players dictate ratios, but they’re the ones with the most knowledge so new players piggyback and fill in lower ROI areas they cannot do due to base space limitations.

Liquidity providers are like lenders of materials since they’ll keep reserves for whoever needs a burst knowing they’ll get repaid down the road. It brings in a sort of lending to the game because you don’t need to build up materials if you want to try a particular business. It leads to a more efficient economy overall.

With population driving total cash in the universe, prices would always mean-revert, like the current system.

This feels a bit like unfounded certainty to me. At best there’s a tradeoff; the profits you’d get from this scheme would be more stable than with higher spread, but I think they would be much lower on average than at least my experience has been with the volatility-induced spreads. And the spreads are way higher than just shipping arbitrage; I think they are definitely more determined by the low overall excess supply (basically, everyone is already consuming everything that’s being produced) and the range of appetite for people to delay their buys/sells.

I do agree that people that do have supplies in reserve help smooth market fluctuations. But this doesn’t at all help when there aren’t supplies in reserve. And, again, I think this is largely due to the fact that, for the most part, people are consuming resources as fast as they are being produced so that they can expand.

I think we will see the liquidity you desire arise organically when expansion slows, because at that point it won’t be possible to consume things as fast as they are produced. The only thing to do will be to place things on the markets or just shift production to the (hotly debated) high-tier MMs that generate cash; at that point it’s just a “high score” game.

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